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WRAPUP 1-Strong U.S. job growth expected in April; wages seen moderate

Lucia Mutikani

* Nonfarm payrolls forecast increasing 185,000 in April

* Unemployment rate seen steady at 3.8 percent

* Average hourly earnings expected to rise 0.3 percent

WASHINGTON, May 3 (Reuters) - U.S. employers likely maintained a strong pace of hiring in April while steadily increasing wages for workers, pointing to solid economic growth and moderate inflation pressures.

The Labor Department's closely watched monthly employment report on Friday is likely to support the Federal Reserve's decision on Wednesday to keep interest rates unchanged and signal little desire to adjust monetary policy anytime soon.

Fed Chair Jerome Powell described the economy and job growth as "a bit stronger than we anticipated" and inflation "somewhat weaker."

Nonfarm payrolls probably increased by 185,000 jobs last month after rising 196,000 in March, according to a Reuters survey of economists. Early hiring by the government for the 2020 Census and winter storms in the Midwest are wild cards to the forecast.

The anticipated job gains in April would be close to the monthly average of 180,000 in the first quarter and well above the roughly 100,000 needed per month to keep up with growth in the working-age population.

"The labor market is rock solid," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania. "It is not overheating and it's perfect for the Fed to keep interest rates on hold."

Another month of solid job growth will be further evidence that February's paltry 33,000 increase in jobs was an aberration. It would also effectively put to rest concerns about a recession and diminish expectations of an interest rate cut this year that had been fanned by a brief inversion of the U.S. Treasury yield curve in March.

Job growth remains strong, despite anecdotal evidence of worker shortages in the transportation, manufacturing and construction industries, suggesting some slack still remains in the labor market.

STEADY UNEMPLOYMENT RATE

Steadily rising wages are keeping workers in the labor force and drawing back those who had dropped out. Average hourly earnings are forecast to have risen 0.3 percent in April after edging up 0.1 percent in March. That would lift the annual increase in wages to 3.3 percent from 3.2 percent in March.

Though wage growth is not strong enough to drive up inflation, it is seen sufficient to underpin economic growth as the stimulus from last year's $1.5 trillion tax cut wanes. The economy grew at a 3.2 percent annualized rate in the first quarter, driven by a surge in exports and inventories, quickening from the October-December period's 2.2 percent pace.

The unemployment rate is expected to have held steady at 3.8 percent in April as more people searched for work. The jobless rate, around the lowest in nearly 50 years, is close to the 3.7 percent that Fed officials project it will be by the end of the year. Economists say there has been a reduction in the number of people collecting disability benefits, testament to the labor market's strength.

"Given the recent improvement in economic activity, we expect more workers to be drawn into the labor force," said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, hit the highest in more than five years in January. Participation has risen especially among the prime-age population, blacks and women.

Some economists expect job growth to slow further this year as fewer workers become available, which will push up wages and lift inflation back to the Fed's 2 percent target. An inflation measure tracked by the U.S. central bank increased 1.6 percent in the year to March, the smallest gain in 14 months, from 1.7 percent in February.

"We think it will be increasingly difficult to find that many new workers each month," said Lou Crandall, chief economist of Wrightson ICAP LLC in Jersey City, New Jersey.

Employment at construction sites likely increased for a second straight month in April, but storms in the Midwest could have been a drag on hiring in the weather-sensitive industry. Manufacturing sector payrolls are expected to have rebounded after declining in March for the first time since July 2017.

The industry is being pressured by layoffs in the automobile sector as assembly plants try to cope with declining sales and an inventory overhang. Further gains in government payrolls are expected in April. (Reporting by Lucia Mutikani; Editing by Andrea Ricci)